Take the 2-minute tour ×
Mathematics Stack Exchange is a question and answer site for people studying math at any level and professionals in related fields. It's 100% free, no registration required.

If we have an a process $X_t$ with values in $\mathbb{R}^{n \times n}$ which solves a linear Stratonovich SDE $$ dX_t = A_t X_t dt + B_t X_t \circ dW_t $$ then the inverse of $X_t$ exists and solves $$ dZ_t = - Z_t A_t dt - Z_t B_t \circ dW_t $$ It is easy to see that $X_tZ_t =$ Id by using the product rule. My question is this:

If $X$ instead solves the affine SDE $$ dX_t = (A_t X_t + a_t) dt + (B_t X_t + b_t) \circ dW_t $$ does it have an inverse?

share|improve this question
    
@ mathman : I guess you have to (at least formally), calculate $d(1/X_t)$ using multidimensional Itô's lemma and check under what conditions the result holds true. Best regards –  TheBridge Jun 15 '12 at 8:39
    
@TheBridge : What is $1/X_t$ if $X_t$ is a matrix? –  mathman Jun 15 '12 at 11:48
    
even in 1d , with b fixed and non zero this process will always hit zero. When $X_t$ gets small it looks like an ordinary brownian motion. –  mike Jun 15 '12 at 12:41
    
@mike : In 1-d this is a geometric Brownian motion, so does not hit zero. –  mathman Jun 15 '12 at 12:58
    
not when you add a constant to the volatility. that's $b_t$ (little b) that should be non-zero. –  mike Jun 15 '12 at 21:15

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.